How Cargo Triggers.... Or NOT
An uncovered Cargo Claim in our Expediting Community has been the subject of conversation recently, so in keeping with my "Confusing Insurance Terms" theme I thought I'd talk about how Cargo "triggers"...or "pays out".
A Cargo policy triggers when a loss occurs and the Bill of Lading from Shipper to Motor Carrier is provided the Insurance Company.
So how does it trigger when the Owner Operator, not the Motor Carrier is insuring the Cargo in transit?
Often forgotten is that the Expediting niche of Owner Operators leased on to multiple Motor Carriers is "Trucking for Hire", ultimately under the selective jurisdiction of FMCSA regardless of Gross Vehicle Weight, and this includes Cargo under the "Carmack Amendment."
So unless an Owner Operator's Cargo Insurance Policy has revised "policy language" that identifies the Owner Operator with care, custody and control of the cargo, most Insurance Companies will not recognize the Owner Operator as the proper entity to "pay out" and coverage is denied.
The original policy language will expect the Cargo coverage to be paid by the Motor Carrier's insurance policy. If the Motor Carrier does not have Cargo on that unit, expecting the Owner Operator's policy to trigger...then there is no coverage whatsoever. (MCS90 & 91X pertain to Liability only, not Cargo.)
Another hazard is addressing and defending "bogus" loss claims...you know, the company claims you damaged their cargo in route even though you didnt? Even if you are not at fault, you can be accused of the loss.
So who pays for the lawyer to address and defend the claim against you?
If the Cargo Policy language has not been correctly revised, you have the risk of legal defense costs that can be thousands of dollars. The Owner Operator and the Motor Carrier are pulled into the litigation where there is no coverage for the Cargo, much less the defense.
That's why it's essential to explain to your insurer the arrangement and relationship with your Motor Carriers, so the Owner Operator's Cargo policy can have the language revised to cover you, your Motor Carrier and the Shipper per contract.
If an Agent refuses to provide evidence from their Underwriting Department in writing that the policy language has been revised for you, then find another agent...it's likely you have no coverage in the event of a challenged Cargo claim.
Shelly Benisch, CIC Shelly@myCISagent.com